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One of the pioneers in vendor-managed inventory is Panduit, which makes 60,000 different electrical products such as switches, fuse boxes, connections, and so on. The company markets solely through 1800 distributors. For its largest customers, Panduit set up a fully automatic computer-to-computer management system. The distributor and Panduit establish mutual goals for service level and inventory turns. The distributors then transmit a daily report on changes in inventory. Without human intervention, the system automatically Forecasts demand for each part number monthly. Determines the optimum replenishment quantity. Creates purchase orders in Panduit s and the distributor s business systems.
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Ships and transmits replacements and the associated electronic paperwork. The advantage of this system is that Panduit has solved its customer s business problems by having Freight costs reduced. Human errors eliminated. Operating costs minimized. Out-of-stock conditions eliminated. Pro ts increased. Distributor loyalty maximized the distributors become relationship buyers.
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National Semiconductor, a major maker of computer chips, handed over its logistics management to FedEx. Before the transfer, National shipped products from its six factories to seven warehouses around the world. FedEx set up a single warehouse in Singapore to house all of National s output. National s customers place orders with National s order center in Santa Clara, California. Many of these orders are placed directly on National s Web site, www.national.com. When the orders come in, they are processed electronically and sent to the FedEx shipment center in Memphis. There the orders are routed electronically to the FedEx warehouse in Singapore, where the products are picked, packed, and shipped by FedEx to National customers throughout the world. The result of this system has been: A reduction in the customer delivery cycle from 4 weeks to 1 week A reduction in National s distribution costs from 2.9 percent of sales to 1.2 percent of sales Elimination of the seven National regional warehouses in the United States, Asia, and Europe
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The FedEx National partnership enabled National to get a jump on its competitors by building pro table relationships with its customers. By combining vendor-managed inventory with FedEx shipment, National could concentrate on its main jobs designing, manufacturing, and selling chips rather than storing and shipping the chips.
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What do these case studies tell us about how database marketing and the Web are helping suppliers to make their customers pro table In the rst case, CSC decided to analyze the rm s customer database, append D&B information, and determine the next best product and top 10 prospects for 1800 independent agents. Bene tMall.com used the Web to help thousands of independent brokers determine the best bene t systems for their customers, signing up 2500 new brokers in the process. Isuzu used the Web to provide its dealers with customized postcards to be mailed to prospects in their area. Radisson Hotels used the Web to encourage 80,000 independent travel agents to increase bookings by $4.5 million, bene ting both the agents and Radisson. Intel used the Web to conduct vendor-managed inventory for Dell, thus reducing Dell s inventory to 8 days, while Dell s competitor Compaq had an inventory level of 3 weeks. FedEx used the Web to help National Semiconductor cut the time required for delivery of parts to customers by 3 weeks per order and cut delivery costs in half. None of these activities would have been possible without a customer database or without the Web. The combination of the two has created a powerful shift in the relationships between suppliers and their customers.
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What Works
Vendor-managed inventory over the Web that permits suppliers to manage their customer s inventories. Providing agents with speci c next best products for each customer and top 10 prospects. Finding out more about the customer s business and solving the customer s business problems. Creating a database of prospects and serving them up to agents via the Web. Taking over logistics management for customers, so that they can concentrate on their core business: designing and manufacturing products.
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